Who wins, loses from mass immigration to California?

If you are middle-class and college-educated, immigrants make your busy life a little easier – and cheaper.

Over the past generation, immigrants like manicurist Trang Le, a citizen, and cosmetologist Maria Rosa, who immigrated illegally, have flocked to the hairdressing and cosmetology business. Since 1970, wages in that field have dropped by 20 percent.

"Occupations and wages, 1970-2008": Register analysis of IPUMS data. See the CPI worksheet for inflation-adjusted wages for 90 occupations. See the KeyJobs worksheet for changes in the native-immigrant balance and mean, inflation-adjusted wage for 13 occupations. Other worksheets (1970, 1980, etc.) list the mean annual wages in “nominal dollars” (as of that year) for more than 300 occupations.

Immigrants like Martha, an undocumented worker in Anaheim, have largely taken over the housekeeping business. Wages for housekeepers have dropped by 30 percent since 1970.

No state and almost no developed economy has absorbed so many immigrant workers so quickly as California. The arrival of more than 5 million foreign workers over the past four decades raises a basic question: Who wins, and who loses?

Among foes of immigration, particularly illegal immigration, it is an article of faith that everyone loses. Immigrants, they say, have driven down wages for natives while saddling taxpayers with billions of dollars for public services.

But the truth is that there are winners and losers. The winners from mass migration are the people in the middle and at the top of the economic pyramid. The losers are those at the bottom.

Economists agree that immigrants have depressed wages for the least-educated workers. In California, where immigrants dominate the ranks of the least educated, that means immigrants largely are hurting other immigrants.

The burden on taxpayers is a murkier issue. In 2007, the president's Council of Economic Advisers concluded that over the long term, immigrants contribute more in taxes than they consume in services. But other studies say that the poorest and least-educated immigrants – including most illegal immigrants – cost more than they pay.

And finally, there is the impact on the economy. Highly skilled immigrants like Budapest, Hungary-born Andrew Grove, who headed Intel for many years, and Sergey Brin, the Moscow native who co-founded Google, helped transform California's economy.

But Martha, the housekeeper, and Trang Le, the manicurist, have remade the economy too. Low-paid housekeepers have allowed women with advanced degrees to work longer hours. Vietnamese immigrants like Le have made manicures a commonplace luxury.

BLUE-COLLAR PARADISE

An analysis by The Orange County Register of nearly 40 years of census data indicates that immigration has contributed to a sharp decline in real, inflation-adjusted wages in many jobs requiring little formal education. But wages have risen for jobs requiring a college education – even in fields such as software development where immigrants greatly swelled the supply of workers.

In short, well-educated natives have competed successfully with immigrants.

The Register analyzed changes in wages and the proportion of immigrants in 90 occupations that employ about 80 percent of the California workforce.

Few occupations illustrate the changes better than auto mechanics and registered nurses.

In 1970, auto mechanics earned slightly more and registered nurses earned slightly less than the statewide average wage, about $34,930 adjusted for inflation. U.S.-born workers dominated both fields.

Auto mechanics, meanwhile, had suffered a 16 percent decline in earning power. That's like working eight weeks a year for free.

Both occupations have absorbed tens of thousands of immigrants.

So why have these two jobs, both once firmly planted in the middle of the California middle class, moved in opposite directions?

Education is a big part of the answer.

Today, as in 1970, very few auto mechanics go to college. But today's nurses are much better educated than their counterparts 40 years ago. In 1970, most RNs had two years of college or less. Today, most have at least a bachelor's degree.

“Education score by occupation, 1970-2008”: Register analysis of IPUMS data. See “CollGrads” sheet; on line 244, percentage of auto mechanics with a 4-year college degree or better rose from 2.1% in 1970 to 5.4% in 2008; on line 64, percentage of registered nurses with a 4-year degree or better rose from 21.4% in 1970 to 60.9% in 2008.

In the California of 1970, it was still possible to drop out of high school and enter the middle class through blue-collar jobs in auto shops and factories. By 1980, the dropout's gateway to the middle class was narrowing. By 1990, it had all but shut.

The difference in pay between the best-educated workers and high school dropouts has widened with time. In 1970, a typical worker with a graduate degree earned twice as much as a high school dropout. By 2008, he earned nearly 41/2 times as much.

Many of these poorly educated immigrants have another disadvantage in competing with native workers: language. At the bottom of the educational scale, an immigrant high school dropout who speaks English very well can expect to make 70 percent more than an immigrant dropout who speaks English poorly.

In today's economy, most of those workers are condemned to low-wage jobs.

BEATING THE ODDS

Not all, however. There are opportunities even at the bottom of the job ladder, even in the worst recession in 75 years.

When Maria Rosa, an illegal immigrant, sneaked across the border from her native Mexico in 1990, she was 27 years old and had a ninth-grade education. She quickly fell into a series of low-paying jobs: hotel housekeeper, flower arranger, banquet server.

Interview, Maria Rosa, Dec. 16, 2009.

But she was ambitious. The Anaheim resident spent part of every day studying English. She went to cosmetology school and got a new job as a hairdresser and manicurist.

Now, with both of her U.S.-born children in gifted programs, she is taking classes part time at night. She hopes to get her high school diploma this year, then study psychology in college.

"People see problems," Maria Rosa said. "I see solutions."

Alex Ortega, 35, crossed the border at age 16, having never made it past middle school.

But seven years ago, after learning the carpet business, he opened his own store.

"I'm the only employee," Ortega said. "I sell, I install, I do everything."

Ortega got a work visa a few years ago and is applying for a green card. He hopes to become a U.S. citizen someday.

The carpet shop has given him a tentative hold on the middle class. He, his wife, their three children and small white poodle, Jack Jr., live in a Garden Grove tract home. A late-model truck is parked outside. He hopes to expand into kitchen remodeling.

ECONOMISTS DEBATE

George J. Borjas is a Cuban immigrant, a Harvard economist and the leading exponent of the view that immigration is driving down wages.

In a widely cited 2003 paper, Borjas wrote that immigration reduced the wages of the average U.S.-born worker by 3.2 percent from 1980 to 2000. High school dropouts were the hardest hit, suffering an 8.9 percent wage cut, while even college graduates saw a 4.9 percent drop.

The Register found similar trends among less-educated California workers. From 1970 to 2008, dropouts' wages fell 25 percent after adjusting for inflation while high school graduates' wages dropped 16 percent. But contrary to Borjas' conclusion, the Register found that college graduates enjoyed a 15 percent wage increase, and those with graduate degrees got a 50 percent raise.

Poorly educated workers are caught in a bind because of the influx of immigrants competing for jobs, Borjas said. While a carpenter could become, say, a plumber if there were too many immigrant carpenters in his field, he said, a high school dropout cannot easily become a college graduate.

Interview, George J. Borjas, Feb. 16, 2010.

Borjas said even the best-educated native workers are hurt by immigrants. While the Register's analysis indicated that wages rose for college graduates, Borjas said that "the wages for these workers would have gone up even more" if there had been no influx of well-educated immigrants.

To all this, UC Davis economist and Italian immigrant Giovanni Peri has a one-word answer: California.

In each of the past four decades, Peri said, California has absorbed a greater number of immigrants than Israel did right after the Soviet Union collapsed and a higher percentage increase than Miami did after the Mariel boat lift from Cuba in 1980.

Interview, Giovanni Peri, May 26, 2010.

"If there is a U.S. state or an economy in the world where the labor market consequences of immigration should have been dramatic," Peri and colleague J. William Ambrosini wrote recently, "California clearly qualifies."

The reason, Peri said, is that immigrant workers differ from natives. There are laborers and engineers but not many in the middle, with skills comparable to most native workers.

Even at the bottom, he argued, an influx of immigrants brings opportunity for natives. More immigrant construction workers need English-speaking supervisors. More immigrant taxi drivers need English-speaking dispatchers. More immigrant landscapers need English-speaking managers and salespeople.

But the arrival of millions of new immigrant workers is bad news for one group, Peri said: older immigrants. Unlike most natives, older immigrants are similar in education and skills to the newcomers. He calculated that the wages of immigrants who arrived before 1990 were 17 percent to 20 percent lower than they would have been had immigration stopped in 1990.

Dozens of economists and interest groups have debated whether immigrants, particularly illegal immigrants, consume more in public services than they pay in taxes.

Here again, there are clear winners and losers.

The biggest winner is the Social Security Administration, which collects billions of dollars annually from illegal immigrants who are ineligible for benefits.

The biggest losers are state and local governments.

Contrary to popular belief, most illegal immigrants work "on the books" and, therefore, must pay taxes. The Internal Revenue Service estimates that 6 million illegal residents file tax returns. Social Security estimates that half of the undocumented pay into the system.

The IRS issues "Individual Taxpayer Identification Numbers," ITINs for short, to taxpayers who are ineligible for Social Security numbers. It believes most ITIN holders are unauthorized workers, a category that includes illegal immigrants and people such as tourists who are in the U.S. legally but not allowed to work. In 2005, it collected $5.2 billion in taxes on $95 billion in income from people using ITINs.

An obscure Social Security fund sheds light on the hidden tax payments of illegal immigrants.

The "Earnings Suspense File" is a multibillion-dollar stash of pay records with mismatched names and Social Security numbers. Many mismatches are the result of innocent error: someone who changes her name because of marriage or divorce but neglects to alert Social Security. But the file has grown so quickly, from $30 billion posted in 1998 to $89.7 billion posted in 2007, that officials believe much of the money comes from unauthorized workers.

For example, a Georgia meat processor reported paying wages to a 31-year-old Texan who was receiving disability benefits. After five investigations, Social Security concluded the Texan really was disabled but that identity thieves had used his Social Security number to report $915,000 in wages over 16 years from 58 employers.

The Center for Immigration Studies, which favors restrictions on immigration, estimated in 2004 that illegal immigrants contributed $7 billion a year to Social Security but cost the federal government a net $10 billion overall. The Congressional Budget Office said in 2008 that if illegal immigrants were driven "off the books," it would cost Social Security about $22 billion over 10 years.

But, the agency said, "that impact (on state and local budgets) is most likely modest" – less than 5 percent of total spending in most states and a higher amount, but still less than 10 percent, in some parts of California.

Not so, says the Federation for American Immigration Reform, which favors slashing legal immigration by two-thirds. In a 2004 report, the group claimed that illegal immigrants cost California $8.8 billion more than they pay in taxes. Half of the bill comes from schooling U.S.-born children of illegal immigrants, whom the group says should not be treated as citizens.

“The Costs of Illegal Immigration to Californians,” by Jack Martin and Ira Mehlman, Federation for American Immigration Reform, November 2004. “Should not be treated as citizens”: A key case establishing “birthright citizenship” for persons born in the U.S. to foreign parents was United States v. Wong Kim Ark, 169 U.S. 649, decided 6-2 by the U.S. Supreme Court in 1893. Ark was born in San Francisco in 1873 to Chinese parents; after he returned from a visit to China in 1895, port authorities in San Francisco refused to admit him, arguing that he was a Chinese national and that the Chinese Exclusion Act of 1882 barred his entry. The court declared he was an American citizen, based on the first clause of the 14th Amendment. Opponents of this interpretation argue that Congress can, under the fifth clause of the 14th Amendment, restrict birthright citizenship to descendants of legal residents.

The contrast between the Congressional Budget Office's "modest" impact and the advocacy group's $8.8 billion estimate for California reveals the many uncertainties surrounding this issue. No one lists immigration status when signing a tax return or enrolling a child in school or visiting an emergency room.

Every cost estimate relies on statistical profiles of the illegal immigrant population – their numbers, income, age, family size, tax payment and use of public services such as hospital emergency rooms. Those statistics become steadily less reliable as one drills down from the nation to states to counties.

The biggest gainers from immigration may be middle- and upper-class natives, particularly women. Immigration has helped make cheap personal services a common feature of middle-class life in California.

University of Chicago economist Patricia Cortes found that prices for housekeeping, gardening, child care and other services fell during the 1980s and '90s in cities where many low-skilled immigrants settled.

As a result, she and colleague Jose Tessada reported, women with professional or doctoral degrees spent more time at work. In economic terms, it's a simple tradeoff: A female physician, lawyer or professor earns more money by hiring someone else to clean her house, do her laundry or care for her children.

An earlier version of Cortes' and Tessada's study carried the provocative title: "Cheap Maids and Nannies: How Low-Skilled Immigration Is Changing the Labor Supply of High-Skilled American Women."

Cortes and Tessada also found that the more schooling a woman had, the more likely she was to hire domestic help. About 3 percent of women with high school diplomas hired housekeepers; the rate rose to 15 percent of women with a college degree and 25 percent of those with graduate degrees.

Martha, the undocumented housekeeper in Anaheim, cleans one house a day, six days a week, collecting $60 to $90 cash for each house. A high school graduate and social worker in Mexico, she has no complaints about cleaning other people's houses: "I earn more (doing) something else than what I studied."

Interview, Martha, Jan. 22, 2010.

Immigration has made life easier for women in smaller ways as well.

Consider the manicure.

From 1987 to 2002, the number of manicurists in California almost doubled. During that same period, Vietnamese women like Trang Le largely took over the business.

Vietnamese immigrants expanded the market for manicures through innovations such as stand-alone nail salons offering walk-in service, economists Maya N. Federman of Pitzer College and David E. Harrington and Kathy J. Krynski of Kenyon College, Ohio, wrote in a 2006 study.

The new Vietnamese manicurists drove out some non-Vietnamese competitors and dissuaded more from entering the business, Federman and her colleagues wrote. But the number of manicurists per capita rose by 45 percent, "implying that the Vietnamese manicurists found many new nails to polish."

Set aside the debates over wages and budgets, and you are left with this: For many Californians, mass immigration has meant cheap nannies and gardeners, cheap restaurant meals and cheap construction labor.

"We are all complicit in this," said Meissner, the immigration commissioner under former President Clinton. "We have all enjoyed lower prices" because of immigration.